Q: My father and mother have a family farm in Iowa and are deciding how to transfer it to the kids. The deal is he's not in perfect health and may end up in a nursing home. I understand that putting it into a trust is a option, and I also understand the farm has to be in the trust for a period of five to seven years to be safe from losing it to the nursing home. We have thought of buying the farm between us kids at its present assessed value, however, the farm hasn't been re-assessed for many years; this is why the kids can afford it.
Is this a good idea? Will they, whoever they are, come back and question, knowing the farm is worth a lot more? If that happens, we (kids) would not be able to buy the farm. Then the concern is, they will re-assess, and then my father will have to pay higher taxes, which we don't want, being on fixed income. Would having a very close friend buy it, and then later buy it back an idea? Is it best to take our chances and put it in the trust, and hope that he never needs nursing home care? Our goal is to not lose the family farm, and to pass it onto the next generation. — Karen, via e-mail
A: The last line in your letter pretty much sums it up. You want to keep the family farm and not pay the costs of your father's care rather let the state, which means the other taxpayers, to pay for him. Whether this is a moral decision is best left for you and your family and discussion at another time.
It is not necessary for your parents to have you guys buy the farm, it could simply be given to you. In my opinion, that is a very poor idea with the notion of having several children own it with undivided interest. In other words, nobody knows which acre belongs to whom. This often times invites heavy duty family fight. Further, if one of the children gets themselves in a financial bind, it could well be because it is not their residence that their creditors would go after their undivided interest in the farm.
It should be noted that in the event that your dad does go into a nursing home and receives Medicaid, more often than not, if the numbers are a decent size, the state will try to recover upon his demise from the farm. The likelihood is, you could transfer this farm into a trust, but in order not to jeopardize the farm, there is what is called a look back period. In other words, if your dad goes into a nursing home and the property hasn't been in the trust for this established period of time, the property is not protected. The difficulty here would be who would be the trustee and determine the disposition of the asset in case someone really needs the money.
You indicate that you couldn't buy it at the current value and that is a consideration. If you are comfortable with the notion that you are trying to defeat your parents' assets being taken upon their care, you should seek out the services of an attorney who can give you the options in his/her opinion. In my opinion, it would definitely not be to transfer the property to the brothers/sisters, but rather use some type of a trust vehicle. Most of us understand the emotion involved in trying to maintain properties from generation to generation, but the idea of having the assets that people have worked for to be preserved by collecting welfare at the very least is not the best idea in the minds of many.
Q: I read your answer to Jennifer in our paper concerning her parents and credit cards. I wanted to see what could be done about my mother's credit card issue. She is 80 years old and lives on approximately $600 per month Social Security. For many years she had been making the minimum payments on a credit card. A few years ago, she found out that there was a monthly charge on her card for theft protection that the card company said she authorized. She has a great memory and does not remember agreeing to this. This charge has added up to over $3,000 with her paying only the minimum payment. She only used the card occasionally along with the monthly fee charge.
In 2006, she contacted the credit card company to see if they would stop the protection fee as she did not order it. The card company continued to send her bills monthly for the past due amounts. My brother called the company and explained that our mother was elderly and had very limited income. The company representative was very understanding and told him to tell our mother not to make any more payments, however, she would continue to receive bills for a few months which did happen.
About two years ago, she began getting telephone calls from a collection agency demanding money. They would not listen to her explanations of the previous year's activity. Awful talking people to this 80-year-old woman. She is afraid to answer her phone, afraid that it is them. This past Friday they called and told her if she would pay $264 per month for one year, they would write off the rest. She asked them how she was supposed to eat and keep the power on with her limited income. They did not care. She just hung up on them. — Frances, via e-mail
A: This is not an unusual situation. The likelihood is that your mother's account was sold to another company for pennies on the dollar. Their only order of business is to collect on the debts they have purchased. Putting aside the awful talking people, etc., a couple of things you didn't tell me. One, does she have other assets? Her Social Security income can't be attached, that is safe. If she does own a home, as an example, the company that purchased the debt could get a judgment and place a lien against the home. There is nothing she can do as long as she is occupying that home and they can't foreclose until she passes away. If she has assets in a bank account, they could possibly be attached.
In this situation, I would contact the credit card company directly and they may very well tell you that the account has been sold. If there are more collection calls, have your mother say please leave a number where my representative can reach you. If they don't provide that, every time they call, hang up. The reality is that the amount is small enough where they will not continue to pursue it over a period of time. If they do leave a number, have one of the family members call and explain to them that there are no assets and the only income is Social Security that goes into a specific account, which they know cannot be attached. If there are other funds in any bank accounts, your mom should establish a direct deposit account for the Social Security and only those funds go into that account. That protects that from any attack.
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